Stablecoins are a $100 billion dollar plus market globally. Canada's QCAD (CAD stablecoin), which I was the initial lawyer for, recently announced investment by US giant Coinbase (although I haven't worked for them for years). Amidst this fast global growth, why are these coins limited to dollars? Why not commodities? Why isn't there an Alberta government-backed PetroDollar that's based on oil? If a coin can be made based on US or Canadian dollars, why not oil? What's holding it back?

The Usefulness Of PetroDollar

Our imaginary Alberta PetroDollar would be a popular stablecoin because oil is a popular commodity - it's the lifeblood of the Canadian economy, which is heavily dependent on cars. Even environmentalists and Environment Ministers travel by plane, and it's a huge chunk of the economy. People in other countries would probably prefer to have their money denominated in oil than the depreciating fiat of Canadian Dollars or US Dollars (it's government policy to make these fall in value by 2% or more per year). Oil has retained value well over the decades, and it's a useful hedge for other investments, and there's a massive derivatives market based on oil. It would also be useful for the Alberta government to promote such a product because it's around 1/5th of the provincial economy. There's obvious demand, a political angle, and it's not a particularly clever idea, so why doesn't it exist?

Securities Laws

Securities laws would be the number one impediment to a PetroDollar. Provincial securities regulators have explicitly released guidance that claims that commodities/asset-backed stablecoins are securities, starting a few years ago. That alone would be sufficient to scare off most entrepreneurs. The challenge is that the PetroDollar would rely on a pool of oil that is added or substracted from as new units are created or destroyed. The units would be a claim on the pool, or if not a claim (since that's not actually a required element of the design of a stablecoin), it would be some sort of mechanism that ensures alignment so that there's a 1:1 relationship. It would be a challenge to construct a PetroDollar that isn't subject to attack by securities regulators. Which raises an obvious solution: what if Alberta did it?

Alberta-Specific Law

What if the Alberta government explicitly passed a law stating that the PetroDollar is not a security? That would solve a lot of problems. At least, within Alberta. The opinions of other regulators in other provinces (and countries) would still be relevant, and they could stop restricted dealers from dealing in them (at least with the people in their provinces). So: the problem would be addressed for just Alberta residents, who would be free to buy, sell, and trade PetroDollars.

People in other provinces could obtain PetroDollars because they'd be an on-chain token that anyone with a user-controlled wallet could buy or sell. There'd also be foreign exchanges/dealers that would pick it up because they don't care about Canadian securities laws. The securities laws of other provinces would only be a minor impediment to the deployment of the PetroDollar globally, but it would be a tough sell to get it into American platforms, which would likely consider the PetroDollar a security. The consideration in a foreign jurisdiction of the status of PetroDollars would depend on their local law, not on the law of Alberta.

To sum it up: the PetroDollar could be created in Alberta, sold in Alberta, and then would circulate globally. This is similar to how Paxos Gold has operated to tokenize gold. If the tokens are available on-chain then in one sense it's not relevant what regulators think about it, because they can't stop the people in their jurisdiction from buying the token on-chain. It's the great regulatory challenge of this local-global industry in which companies/trusts can be located in one place but serve a global system.

Models

The PetroDollar could rely on a trust setup. These have been popular under the auspices of the NYDFS, which gives credibility and oversight. Although if it was Alberta-backed, they'd want it to be based in Alberta, which could be done as a provincial trust company. Or housed within an existing one, like Tetra Trust, a crypto-focused trust company conveniently located in Alberta. The ideal setup is that the operator of the PetroDollar is separate from the trust company that holds the oil. How exactly they'd hold gigantic amounts of oil is certainly a logistical problem, but these sorts of technical problems can almost always be overcome where there's consumer demand and legal permissiveness.

A PetroDollar could be launched within weeks of a special law permitting it. So long as all of the customers are Albertans, there'd be no impact on other provinces. And then if the Alberta-based buyers export the tokens on-chain to the rest of the world, that wouldn't be a concern for the PetroDollar's creators. For AML reasons, they'd probably prefer this model, with a small set of dealers authorized to do business. The smaller the number, the easier it is to achieve excellent AML compliance.

Stablecoins have been set up all over the world. A PetroDollar would want to draw on some of these best practices, with frequent audits, etc. USDC is a good example to look at. And they have a leg up in the global competition because of US permissiveness, including expected upcoming legal changes that will explicitly endorse these dollar-backed stablecoins.

The Venezuelan Example: Petro Token

There was actually a Petro token launched by the Venezuelan government and shuttered last year. It was not a success, but this has more to do with Venezuela than cryptocurrency:

Ultimately however, its use remained limited to some state operations such as the payment of taxes. Traffic fines were handed out in petros, but it was not possible to actually pay them using the cryptocurrency. The government forced banks to present their balances in both bolivars and petros. On the Patria Platform, mainly used by government to dole out subsidies to the population, users could only exchange petros for bolivars via an auction system.

The First PetroDollar

The countries that don't embrace stablecoins? They'll end up using US stablecoins. Or other foreign ones. Users won't mind, and probably won't know, what country their coins come from. In 2025 it's reasonable to even say that nationality of coins isn't relevant.

It may be the case that the PetroDollar will launch in America, another large oil producer, and then Albertans will end up using the US PetroDollar instead of a domestic one. Although there's not much downside to that (almost none, from a user perspective), it would mean a loss of a large amount of the storage, processing, and financial fees that would be generated. The places that don't get on board will lose out on the benefits, which although not enormous (since stablecoins generally have very low or zero fees), may end up being increasingly important as stablecoins continue their rapid growth. Does anyone believe that the future of all commodities and assets isn't digital representations? The world's largest asset managers have been saying this, and many of the smartest technologists have been beating that drum for years. The release of the PetroDollar is a matter of time, not plausibility or legality.

The strategy above is probably too bold for a Canadian project, especially for a provincial government. So it's more likely to be done by an oil state abroad, or by an oil company that has a large amount of oil at any given time in their inventory, which could form the basis of the oil that supplies the PetroDollar at a reasonable cost. There's probably a few players who could put something like this together, and the end result would be that crypto users can add PetroDollars to their wallet, just like QCAD, USDC, Paxos Gold, and other tokens, moving things along closer to my vision of MCMA wallets that I've written about previously.

The PetroDollar is feasible right now. Who will build it? Who will build the next hard asset coins?